Banks operate in an exceptional environment. Their business, which relies on a maturity transformation of the interest rate curve, must now navigate the anomaly of negative official interest rates and the undeclared objective of central banks to continue lowering long-term yields. Our institutions face increasing digital competition that targets the most profitable business segments but is not subject to the strict regulatory and supervisory requirements of banks. It is noteworthy that many of the uncertainties plaguing them do not stem from their own activity, but rather from the authorities’ management, such as the growth of shadow banking. <\/p>\n
The complexity in which banking activity currently operates leads to an interesting debate about its future. Some believe that it must reinvent itself by seeking a different business model and assume that many of the abnormalities of the current operating context have become the new normal. Others claim that the banking sector is undergoing a reconversion, as if financing families and businesses, managing their savings, and providing financial services had become outdated, and they warn of the difficulties of digital disruption. In most cases, these voices forget that adaptation and innovation have always been the distinguishing features of banks. Furthermore, authorities have begun to assess the potential risks of tech giants entering the provision of financial services and products, risks ranging from competition and customer protection to financial stability. <\/p>\n
The future is unwritten. Banking activity has always relied on innovation and talent, based on continuous training of its employees. The current difficulties faced by banks can undoubtedly generate concern, but they serve as an incentive to drive the necessary changes to overcome them. The digitalization of society offers enormous opportunities to banks, as they have demonstrated over the last decade of rapid technological changes. And they have done so in collaboration with new Fintech entrants, prioritizing customer experience above all else. Rapid digitalization creates a certain social dizziness and entails the risk that part of society will not benefit from it due to lack of training. However, the provision of digital financial services has adapted seamlessly to demanding customer needs. According to a Deloitte report, Spanish banks offer more digital financial services than their European competitors at a significantly lower price. <\/p>\n
The efforts of banks to operate in this difficult scenario may justify their right to question its very existence. Extraordinary expansionary monetary measures were decisive in overcoming the crisis. However, their prolonged duration generates uncertainties about their effectiveness and risks both in the functioning of markets and in the stability of the financial sector. The transmission of monetary policy in Europe occurs through banks, which makes them the solution and not the problem in the face of the limits of monetary expansion. Regulatory changes have been significant, continuous, and independent of the development of other events. A demanding capital requirement at a high cost that has not been affected by the collapse of official interest rates. Increased competition is always positive, but it must be on a level playing field. The fragmentation of the sector in Europe and low profitability are probably more conditioned by the need to remove obstacles to the completion of the Banking Union than by the sector itself. <\/p>\n
Banks must write their future. And authorities must make it viable, given the importance of credit institutions in enabling strong and sustainable growth. Let us remember the commitment of banks to connect their financial and business objectives with social and environmental benefits for society as a whole. <\/p>\n